Wednesday 18 November 2020 6:06 pm

Boohoo factory saga 'one of the worst ESG scandals' in UK history, Leicester MP says

The discovery of poor working conditions in Boohoo’s Leicester supply chain has been branded “one of the worst environmental, social and corporate governance (ESG) scandals in modern UK history”, by one of the city’s MPs.

Liz Kendall, the MP for Leicester West, today again called on Boohoo’s executive chairman Mahmud Kamani and chief executive John Lyttle to step down and slammed major shareholders for their response to the scandal.

Boohoo yesterday appointed Trainline finance chief Shaun McCabe as an independent non-executive director as part of its “agenda for change”, after it pledged to tackle the problems in its Leicester supply chain.

However Kendall said the move “will not solve fundamental governance weaknesses where boards are still in the power of an all-powerful founder chairman”.

She said the reaction from shareholders Jupiter Fund Management, Fidelity Investments, Invesco and Blackrock to the situation “has so far been extremely disappointing”.

Kendall said she told the firms that she “did not think that those who had turned a blind eye to these problems over many years were the right people to take the company forward”.

The MP praised the actions of Standard Life Aberdeen, which divested most of its shares in the company following the revelations. 

An independent review, conducted by Alison Levitt QC and published in September, found that allegations of low pay and poor working conditions at Boohoo’s Leicester supplier “not merely well-founded but substantially true”.

It also revealed that the company’s monitoring of its Leicester supply chain was “inadequate”, which was “attributable to weak corporate governance”.

The company vowed to address all of the concerns raised in the report.

In response to the findings of the Levitt review, Lyttle said the group would implement “necessary enhancements to its supplier audit and compliance procedures, and the board’s oversight of these matters will increase significantly”.

Today Kendall said Jupiter, Fidelity, Invesco and Blackrock’s commitment to engage with the fast fashion firm “made a mockery of their promises and claims to champion responsible investment”.

“This matters, because these are the companies that manage the retirement savings of millions of ordinary Britons,” she said. 

Kendall added: “Standard Life Aberdeen is to be applauded for its decisions, because fund managers need to champion responsible investing—not as the latest marketing gimmick, but because they intend to drive real change. 

“Otherwise it is all just warm words and not worth the paper, or website, it is written on.”

In a letter to Kendall last month, Jupiter stood by Kamani and Lyttle, saying the necessary changes would be made more quickly by working with the current management team.

The Environmental Audit Committee (EAC) has launched a follow-up inquiry into sustainability and working conditions within the fashion industry, prompted by the conditions within Boohoo’s supply chain. 

City A.M. has contacted Boohoo, Jupiter, Invesco, Fidelity and Blackrock for comment.